Question
Part 1. Answer the following questions? Show procedure. a) Ford Motors currently has a stock price of $8.50. A call option, that expires in two
Part 1. Answer the following questions? Show procedure.
a) Ford Motors currently has a stock price of $8.50. A call option, that expires in two weeks, with a strike price of $10 has a premium of $0.50. If, in two weeks, Fords price is $11, what is the profit for:
- The person who sold the call option today?
- The person who purchased the call option today?
b) Ford Motors currently has a stock price of $8.50. A call option, that expires in two weeks, with a strike price of $10 has a premium of $0.50. If, in two weeks, Fords price is $9.50, what is the profit for:
- The person who sold the call option today?
- The person who purchased the call option today?
c) Caterpillar Inc. currently has a stock price of $141. A put option, that expires in two weeks, with a strike price of $130 has a premium of $11. If, in two weeks, Caterpillars price is $124, what is the profit for:
- The person who sold the put option today?
- The person who purchased the put option today?
d) Caterpillar Inc. current has a stock price of $141. A put option, that expires in two weeks, with a strike price of $130 has a premium of $6. If, in two weeks, Caterpillars price is $132, what is the profit for:
- The person who sold the put option today?
- The person who purchased the put option today?
e) Assume you own shares of Tesla stock, and you are worried the stock will lose significant value in the next month. You dont want to sell the stock, but you want to hedge your loss in case the stock does lose value which type of option might you use to hedge your position? Call or put?
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